2022 (11) TMI 1032 - AT - Income Tax

Tribunal allows bonus deduction, emphasizes employee benefits. Remands unsecured loan issue for fresh review.

Sh. Karam Singh Malik Versus Income Tax Officer, Ward-44 (4), New Delhi

Sh. Karam Singh Malik Versus Income Tax Officer, Ward-44 (4), New Delhi - TMI Issues:1. Challenge to disallowance of deduction claimed under section 36(1)(ii) for bonus paid to employees.2. Addition under section 68 for unsecured loan.Analysis:Issue 1: Disallowance of Deduction under section 36(1)(ii) for Bonus Paid to EmployeesThe assessee challenged the disallowance of Rs.27,26,550 claimed as a deduction under section 36(1)(ii) of the Income-tax Act, 1961 for bonus paid to employees. The Assessing Officer disallowed the amount, which was upheld by the Commissioner (Appeals). The counsel for the assessee argued that the deduction claimed was erroneously disallowed based on an inadvertent mistake in the Audit Report. The Auditor incorrectly mentioned the bonus as profits or dividends payable, leading to the disallowance. The assessee submitted a certificate from the Auditor acknowledging the mistake. The Tribunal noted that the Special Bench decision in M/s. Dalal Broacha Stock Broking Pvt. Ltd. case held that bonus or commission paid to employees should be allowed as a deduction under section 36(1)(ii) irrespective of the reasonableness of payment or services rendered. As the employees were not partners or shareholders, the disallowance was unwarranted. The Tribunal directed the Assessing Officer to verify the certificate and allow the deduction, ruling in favor of the assessee.Issue 2: Addition under Section 68 for Unsecured LoanThe Assessing Officer added Rs.4,56,000 under section 68 of the Act as unexplained cash credit due to the assessee's failure to prove the genuineness of the loan transaction. Despite the assessee providing additional evidence such as bank statements and income tax returns before the Commissioner (Appeals), the evidence was not admitted. The Tribunal held that if the assessee could not furnish the necessary documents before the Assessing Officer but submitted them later, the evidence should not be rejected solely based on the remand report's observation. The Tribunal emphasized that technicalities should not hinder the admission of crucial evidence that could impact the decision. Consequently, the issue was remanded back to the Assessing Officer for fresh adjudication, with instructions to provide a fair hearing to the assessee.In conclusion, the appeal was partly allowed, with both issues analyzed in favor of the assessee. The Tribunal's detailed analysis and application of legal principles ensured a fair adjudication of the disputed matters.